Competitive Dynamics And Early Mover Advantages Under Economic Recessions

Roberto Vassolo, Javier García-Sánchez, Luiz Mesquita

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

In light of the recent macroeconomic instability in global markets, we examine the evolution of competitive dynamics and firm profitability when industries are subject to recessions. Although ordinary intuition leads most to view recessions as harmful, we highlight conditions under which they enhance the relative value of industry-level supply-side isolating mechanisms, thereby affording early movers significant and sustainable profit advantages vis-à-vis laggards. We observe that the distribution of firm size within the industry switches from a bi-modal distribution (i.e., one dominated by both small and large firms) to a right-skewed one (i.e., dominated mostly by large firms) in these contexts, thereby signaling the rise of important opportunities in the form of less rivalrous competitive contexts for survivors of recessions. We derive our results from formal modeling and multiple simulation runs.

Original languageEnglish (US)
Pages (from-to)22-36
Number of pages15
JournalRAE Revista de Administracao de Empresas
Volume57
Issue number1
DOIs
StatePublished - 2017

Keywords

  • Competitive dynamics
  • First mover advantages
  • Industry life cycle
  • Recessions
  • Supply side isolating mechanisms

ASJC Scopus subject areas

  • Business and International Management
  • Business, Management and Accounting (miscellaneous)
  • Industrial relations
  • Strategy and Management
  • Management Science and Operations Research
  • Organizational Behavior and Human Resource Management
  • Information Systems and Management
  • Marketing
  • Management of Technology and Innovation

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